Introduction
The case of Asante Technologies, Inc. v. PMC-Sierra, Inc (2001) is a significant United States federal court decision concerning the application of the United Nations Convention on Contracts for the International Sale of Goods (CISG). The judgment provides important clarification on two key issues: first, how a company's "place of business" is determined for the purposes of the CISG, and second, what is required for parties to a contract to effectively exclude, or "opt-out" of, the Convention's application. This discussion will examine the court's reasoning, arguing that the decision reinforces the CISG as the default legal framework for international sales contracts and establishes a high standard for parties wishing to apply domestic law instead.
Determining the Place of Business and CISG Applicability
The initial issue before the court was whether the CISG applied to the transaction at all. The plaintiff, Asante, had its headquarters in California, USA. The defendant, PMC-Sierra, was headquartered in British Columbia, Canada, although it was incorporated in Delaware and had a subsidiary in California. Both the USA and Canada are contracting states to the CISG, which under its Article 1(1)(a) applies to contracts of sale of goods between parties whose places of business are in different contracting states.
Asante argued that PMC-Sierra's "place of business" should be considered its Californian office, which would make the contract a purely domestic one. However, the court rejected this argument. It applied Article 10(a) of the CISG, which states that if a party has more than one place of business, the relevant one is that "which has the closest relationship to the contract and its performance" (Asante Technologies, Inc. v. PMC-Sierra, Inc, 2001, p. 1148). The court found that all significant commercial activities, including negotiations, correspondence, and the location of the defendant's marketing and sales personnel, were centred at PMC-Sierra's Canadian headquarters. Therefore, its relevant place of business was in Canada, making the contract international and bringing it within the scope of the CISG.
The Ineffectiveness of the Choice of Law Clause
The most influential aspect of the case is its ruling on the attempt to opt-out of the CISG. Article 6 of the CISG allows parties to exclude the application of the Convention. Asante’s purchase orders contained a clause stating the agreement "shall be governed by and construed under the laws of the State of California" (Asante Technologies, Inc. v. PMC-Sierra, Inc, 2001, p. 1151). Asante contended this clause was a clear choice of Californian domestic law, thereby excluding the CISG.
The court disagreed, holding that the clause was not sufficiently specific. It reasoned that the CISG, as a treaty ratified by the United States, is federal law and therefore forms part of the law in every state, including California. A general reference to "the laws of the State of California" was deemed to include the CISG as applicable federal law. The court concluded that to effectively opt-out, the parties must do so expressly. For example, they could specify that the contract is governed by the "California Commercial Code" or by stating "the U.N. Convention on Contracts for the International Sale of Goods shall not apply" (Carr and Primak, 2013). The general clause used by Asante was found to be ambiguous and insufficient to demonstrate a clear intent to exclude the Convention.
Conclusion
In conclusion, Asante Technologies, Inc. v. PMC-Sierra, Inc serves as a key authority in the interpretation of the CISG within the United States. The decision affirms that the Convention will be applied as the default law in qualifying international sales, promoting the CISG’s goal of creating a uniform legal regime. It sends a clear message to commercial parties and legal practitioners that if they wish to avoid the CISG, they must use explicit and unambiguous language in their contracts. By setting a high threshold for opting out, the case provides greater certainty and predictability in international trade, preventing parties from inadvertently excluding a body of law designed to govern their transaction.
References
Asante Technologies, Inc. v. PMC-Sierra, Inc, 164 F. Supp. 2d 1142 (N.D. Cal. 2001).
Carr, I. and Primak, L. (2013) 'The Role of the CISG in the Harmonisation of International Commercial Law: A Review', Amicus Curiae, (93), pp. 11-19.
United Nations Convention on Contracts for the International Sale of Goods (1980).
